February 27, 2008

How is it that corporations have the rights that individuals do, but not the responsibilities?

Let's reflect on what a corporation is. A business is formed by a few people. The business asks the government for a corporate charter, pays a fee, and is then this special entity called a corporation with special rights granted by the government.

Under our laws, corporations are fictional persons with certain rights. They can own assets, employ agents and engage in contracts just like people. But unlike you or me they have special benefits including limited liability and unlimited life.

Corporations enjoy limited liability -- if you or I commit a crime, injure someone, go bankrupt or get sued we're in big trouble and have to suffer the consequences. But this is not what happens to the owners of corporations. Their liability is limited and if their corporation is involved in any of these things they can just fly away in their private jets. In some jurisdictions corporate officers and directors are even shielded from liability for criminal acts the corporation commits.

Corporations have unlimited life -- which means the entity continues beyond any individual. The assets owned by a corporation can stay and grow in that corporation, and be controlled by its owners perpetually. So the corporation is able to amass significant assets and resources.

A corporation is not taxed the same as individuals. In most case they pay much lower taxes, the dividends they pay their owners are taxed at lower rates, as are the capital gains. In fact there are many circumstances where corporations do not have to pay taxes at all! So the burden of paying for the roads and schools (and wars) falls on the rest of us.

Corporations are able to compel large numbers of people -- employees, contractors, other corporations and other paid entities -- to do certain things. They can even tell people what to wear, how to wear their hair, even to wear makeup or not.

These special rights help corporations build up tremendous resources and power far beyond the ability of any individual in our society. So individuals finding themselves up against corporations face tremendous disadvantages. Many of the mechanisms for mitigating this disparity, including unions, the right to sue, taxes, even government regulation, have been reduced as a result of corporate-funded lobbying, ballot initiatives or other efforts. The ability to amass tremendous assets and power enables the people at the top of corporations to have great influence over our government and the laws it makes -- even to the point of granting them ever greater rights and benefits and tax cuts -- helping them to amass even greater assets, resources and power.

Corporations make decisions in ways that are very different from how We, the People of America and California make our community decisions through our governments. In our government all decisions and spending are participatory and transparent, meaning all of us can vote for representatives and can watch or otherwise look at how decisions are made and understand where all money is spent. In California it is even illegal for a city council committee to meet in secret. This is certainly not how things are done with corporations. (By the way, this is why some people say corporations are "more efficient"-- they do not have the procedures for the degree of transparency and accountability that governments and other public entities require.)

Question -- are these differences between public and corporate accountability and transparency compatible with our understanding of democracy? What about the ability of corporations to influence how our government regulates corporations? Keep in mind that corporations are nothing more than the creation of our laws. So discussing questions like these is essential to the maintenance of that democracy.

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Recommended viewing: The Corporation. It is a 145-minute documentary which analyzes the characteristics and properties of corporation. A fascinating angle is to see a corporation as an actual human being and then analyze its behavior on those terms. The diagnosis: corporations behave exactly like clinical psychopaths.